The Standard and Poor’s 500 Index (SPX) gapped open Friday morning and closed trading at 3975, up 65 points on the day or 1.7%. SPX opened the week at 3916, so the net gain for the week was 1.5% - SPX recovered the entire week’s losses on Friday. 2021 has been rough year so far with three pull backs: one ended January 29th; one ended March 4th and this last one ended Thursday? In all three cases, it appears that the 50-day moving average (dma) was the level for the market to find support and recover. Throughout this series of pull backs, the S&P 500 index trading volume has remained generally below average with few exceptions. That suggests that traders have not yet thrown in the towel and began significant selling. Instead, it appears to represent a rotation out of high tech into more cyclical industrial and commodity stocks.

VIX, the volatility index for the S&P 500 options, closed Friday at 19% after hitting 21.5% intraday. Friday’s close matched Monday’s close and both are the lowest levels of implied volatility observed this year.

IWM, the ETF based on the Russell 2000 group of companies, closed Friday at 220.61, up 3.95 or 1.8%. But IWM remained down 2.9% from its open on Monday. On the positive side, IWM recovered the 50 dma that it broke on Wednesday.

The NASDAQ Composite index closed Friday at 13,139, up 161 points on the day but down 1.1% for the week. NASDAQ broke down through its 50 dma last week and remained well below it on Friday (13,426). NASDAQ’s trading volume remains well below average and has only broken the 50 dma once since March 5th (on quadruple witching last Friday).

This has been a rough ride for traders this year. The S&P 500 has pulled back three times now, but each time it has found support at the 50 dma and bounced back higher. However, the real damage has occurred in the NASDAQ Composite with the rotation out of high-tech stocks. Friday’s market action was very encouraging, and in normal times, I might have invested heavily, but I didn’t. The whipsawing back and forth over the past couple of months has me a little gun shy (a term from hunting with bird dogs). I am now 88% in cash. On the positive side, the 50 dma on the SPX price chart has proven itself as the solid line in the sand, and the VIX is as low as it has been all year. But I am still worn out.

I will be watching the market carefully on Monday to see if it makes sense to begin to dip my toes in the water. I hope the crocodiles are gone.